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How to Find the Right Improvement Initiatives for Lag Measures

June 12, 2018 by Stacey Barr

Lag measures cannot be improved directly; only through changing one or more of their lead measures. And there are six basic steps to make this happen.

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Measure Up reader, Bill W, recently asked me about monitoring lag measures with XmR charts. He said (paraphrased):

“If we monitor a lag measure like Revenue using an XmR chart, I keep thinking it may be limited in terms of what we can glean from it. The reason is: a measure like this is impacted by several underlying business processes. Would it not be more valuable to try to identify specific processes and go from there?”

In his video on the 4 Disciplines of Execution, Chris McChesney introduces the way that we should use lead and lag measures to drive improvement. He says:

“No matter what you’re trying to achieve, your success will be based on two kinds of measures: lag and lead. Lag measures track the success of your wildly important goal… Lead measures track the critical activities that drive or lead to the lag measures.”

In PuMP, we build measures as a system of lead and lag measures, from the top to the bottom of the organisation. Here are the basic steps that outline how to use that system of measures to get the right kinds of improvement initiatives happening, that will ultimately improve the lag measures:

Step 1: Build a Results Map to make the impact logic clear.

A Results Map is a PuMP technique that clearly shows the relationships between and among goals at all levels in an organisation. It’s powerful because:

  • it captures the strategy in a single view to make it easier to test and talk about
  • it captures the strategy in measurable language to make it easier to understand in a tangible way
  • it shows the lead-lag relationships, which flow in cause-effect links from outside to inside
  • it gives everyone a line-of-sight from their goals to the organisation’s direction and purpose

The selection of the right measures and the right improvement initiatives always starts with a Results Map.

Step 2: Measure everything in the Results Map.

If a goal is in the Results Map, it’s because it matters and needs to be improved. So every goal in the Results Map gets measured. And we use XmRs to monitor every one of them, no matter whether they are lead or lag.

We do this because XmR charts show us how a measure is changing over time, when it changed, what type of change it was, and how far it is from the target. This is important to know for all measures, lead or lag.

Step 3: Choose the lag measure you want to improve.

When you focus on just one of the lag measures in your Results Map, you can effectively trace back to all the lead or driver measures that influence it. You do this by following the cause-effect links backwards.

You’re effectively focusing just on a single slice of the Results Map. That slice contains all the measures that will hold the clues for how to improve your lag measure.

Step 4: Examine the logical impact chain of measures that link into the lag measure.

For all the measures in your Results Map slice, look at all the XmR charts. Look for signals that suggest a lead or driver measure is doing one of two things:

  • moving in the wrong direction, which will, in time, make the lag measure perform even worse
  • flatlining and not improving at all, which means it might be constraining the performance of the lag measure

This process of analysis will help you shortlist the lead or driver measures that need to shift now, to have the biggest positive impact on your lag measure.

To do this, it can help to arrange the XmRs for each of the measures in your Results Map slice in what visual analysis expert Stephen Few calls small multiples – so you can visually pick up correlations and other patterns.

Step 5: Decide which process or processes need to change.

Once you’ve chosen the fewest lead measures or driver measures that must improve, you’re ready to think about what exactly to do about it. For each of these measures, ask:

  • which business process does this measure relate to?
  • is this a measure of the output or that business process?
  • or is this a measure of a critical activity within that process?

Flowchart the process, with a team of people who work in it and know it well. And with that team, look for weak points or disconnects or constraints that limit the performance of the lead or driver measures.

Now you will know which part of how the business works your improvement initiative should focus on.

Step 6: Improve the process with a business experiment and test the result.

For the parts of the process that need to change, design a business experiment to define what should change and what impact it should have. Make the change, and then check the lead or driver measures to see if the change improved performance.

Then check XmRs of the measures in the logic chain of your Results Map slice. See if the improvement bubbles up to the lag measure that was the whole reason for doing this in the first place. Remember, though, that because it’s a lag measure, it might take more time before the improvement bubbles up.

To find the right initiatives for lag measures, we need to be deliberate and patient.

The incorrect time on a watch face won’t be fixed by working on the watch face. You need to get inside the system to find out which part of the whole mechanism is out of step. Similarly, a lag measure won’t improve without a system of lead or driver measures to point at where in the business system change is needed.

Lag measures cannot be improved directly – only through changing one or more of their lead measures.
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TAKE ACTION:

For one of your lag measures, which you want to improve, sketch a slice of your own Results Map, to build a logical impact chain (or web) that helps you find the lead measures which in turn will help you find the best improvement initiatives.

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